BILL ANALYSIS �
Senate Appropriations Committee Fiscal Summary
Senator Christine Kehoe, Chair
SB 1391 (Liu) - CalFresh benefits: overissuance.
Amended: April 23, 2012 Policy Vote: Human Services 6-0
Urgency: No Mandate: Yes
Hearing Date: May 7, 2012 Consultant: Jolie Onodera
This bill meets the criteria for referral to the Suspense File.
Bill Summary: SB 1391 would establish procedures for recovering
CalFresh overissuances for both current and former recipient
households. This bill would define minimum thresholds for
overissuance establishment and collection caused by
administrative error (AE), inadvertent household error (IHE),
intentional program violation (IPV) or fraud. This bill would
also authorize the Department of Social Services (DSS) to
establish a minimum cost-effective threshold for collecting
overissuances, as specified.
Fiscal Impact:
One-time significant costs to modify automation systems,
likely in the hundreds of thousands of dollars
(Federal/General Fund).
Annual ongoing state-reimbursable county administration
costs for extended collection periods resulting from reduced
recoupment rates (General Fund).
Potential ongoing administrative cost savings due to
raising the overissuance recovery threshold, however, due to
county budget constraints, administrative savings may be
difficult to realize. Additionally, the conversion to
semi-annual reporting (SAR) may result in minimal
administrative impact due to increasing the threshold.
Potentially significant DSS workload and staffing costs to
revise regulations and complete a cost-benefit analysis to
submit for federal approval.
Background: Existing law establishes the CalFresh program, which
administers the provision of federal Supplemental Nutrition
Assistance Program (SNAP) benefits, formerly food stamps, to
families and individuals meeting specified income and
eligibility requirements. Existing federal law provides for the
collection of fraudulent and non-fraudulent overissuances of
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SNAP benefits and authorizes the delegation of collection to
appropriate state agencies.
Currently, the structure and processes for collection of
CalFresh overissuances are delineated in DSS regulations. Under
federal statute, a state agency may opt not to establish and
subsequently collect an overpayment that is not cost effective.
States are eligible to follow the federal Food and Nutrition
Service (FNS) threshold or follow their own cost effectiveness
plan subject to federal approval.
Under federal statute, states may opt not to establish a claim
if the overpayment is $125 or less unless the household is
currently participating in CalFresh or the claim has already
been established or discovered in a quality control review.
Currently, the state's overissuance recovery threshold for
overissuances resulting from AE is $35.
The federal benefit reduction policy is as follows:
For an AE or IHE claim, the amount reduced is limited to
the greater of $10 or 10 percent of the household's monthly
benefit.
For an IPV claim, the amount reduced is limited to the
greater of $20 or 20 percent of the household's monthly
benefit.
Pursuant to the Lomeli v. Saenz court case settlement, the state
recoups AE claims by reducing monthly benefits by five percent
or $10, whichever is greater for up to three years. IHE and IPV
claims are collected at the same recoupment rates specified
under federal statute.
Federal law requires 100 percent of recouped benefits due to an
AE claim to be returned to the federal government. For IHE
claims, the state retains 20 percent (or 35 percent if reducing
unemployment compensation benefits) of the amount collected and
for IPV claims, the state retains 35 percent. In California,
cash collections and benefit reductions are retained at the
county level and reconciled quarterly to provide the federal and
state portion of collections.
Proposed Law: This bill would provide that current and future
CalFresh benefits shall be reduced subject to adequate and
timely notice, as specified, and as follows:
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For overissuances caused by IHE, IPV, or fraud - monthly
benefits shall not be reduced by more than 5 percent of
$10, whichever is greater, unless the recipient elects a
higher rate.
For overissuances caused by AE - monthly benefits shall
not be reduced by more than 5 percent or $10, whichever is
greater, unless the recipient elects a higher rate. AE
claims will only be recovered if required by federal law or
if the overissuance exceeds $125 or the threshold
established by DSS, whichever is greater.
For households no longer receiving CalFresh:
No overissuance caused by AE shall be established or
collected under $125 or the DSS-established threshold,
whichever is greater.
Overissuances caused by IHE shall be collected if $35 or
greater.
Overissuances caused by IPV or fraud shall be collected
pursuant to federal law.
The bill requires reasonable cost-effective methods of
collection to be implemented, as defined by the DSS, as well as
adequate and timely notice to households. The bill also
authorizes DSS to establish a minimum cost-effective threshold
for collection, subject to federal approval, if greater than the
federally recognized threshold of $125. Counties would be
authorized to write-off or terminate overissuances subject to
established federal provisions.
Related Legislation: AB 6 (Fuentes) Chapter 501/2011, among
other provisions, changed reporting requirements for CalFresh
recipients from quarterly to semi-annual reporting (SAR). SAR is
not anticipated to be implemented until Fiscal Year (FY)
2013-14.
Staff Comments: DSS will likely incur one-time significant costs
to modify automation systems in order to effectuate the
overissuance threshold change as well as reprogram recoupment
rates. The exact cost is unknown at this time but could be in
excess of several hundred thousand dollars.
The federal Status of Claims Against Households Report
(FNS209-Q1/FFY12) indicated outstanding claims totaling over
$440.5 million. Of the $16.3 million in overissuances collected
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that quarter, $7.3 million or 45 percent was classified as AE
and returned to the federal government. Of the $8.2 million
collected for IHE claims, $1.6 million was retained by the
state/counties, and for IPV claims, $270,000 of the $772,000
collected was retained by the state/counties.
Because the provisions of this bill revise the rates of
collection for IHE and IPV claims, the length of time it would
take counties to recover payments would be extended, resulting
in increased administrative costs. Under current law, IHE claims
are collected at a 10 percent rate. As this bill proposes to
collect all claims at the rate of 5 percent, the average IHE
overissuance claim of $437 could take 10 more months to collect.
Currently, IPV claims are collected at a 20 percent rate. By
reducing the collection rate to 5 percent, the average IPV claim
of $820 could take 15 more months to collect. Further, the
lengthier collection periods would result in a reduction in
annual ongoing collection revenue to the state and counties.
It is unknown the degree to which raising the minimum threshold
for collection to $125 may impact county administrative costs.
To the extent it results in the establishment of fewer claims
would result in some degree of county workload relief, however,
realizing county administrative cost savings may be difficult.
Additionally, with the conversion from quarterly to semi-annual
reporting (SAR), the average CalFresh overissuance may increase,
thereby mitigating the impact of increasing the minimal
threshold.
It is unclear at this time how the timing of the conversion to
SAR and its full implementation, which is projected in FY
2013-14, may interact with the implementation of the provisions
of this bill and the potential to exacerbate/mitigate potential
errors.
Recommended Amendments: To maintain the collection rates
established in existing regulations and avoid extended
collection periods as well as delays in revenue recovery, staff
recommends an amendment to specify IHE and IPV allotment
reduction rates as reflected in current DSS regulations.
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